Best Wisconsin Joke of the Week. From WMC, of course.

The Wisconsin Supreme Court ruled today that software purchased by the Menasha Company was 'customized' and therefore not subject to Wisconsin sales tax. Wis. Supreme Court decision blows hole in budget.

Highlights from the story by Associated Press include:

• The Wisconsin Supreme Court may have blown a $265 million hole into the state budget on Friday.

• The divided court ruled that the state improperly was collecting sales tax on customized computer software sales.

• The ruling, written by the court's newest member Justice Annette Ziegler, takes the side of the state's business community.

• Wisconsin Manufacturers and Commerce, the state's largest business lobby, spent an estimated $2.2 million on behalf of Ziegler in her successful race for the Supreme Court last year.

• The group also filed a brief in support of Menasha in the case.

• Supreme Court Justice Shirley Abrahamson, writing for the three dissenting justices, said the ruling was clearly wrong. "Wisconsin taxpayers will pick up the tab by those who have escaped taxation as a result of the majority opinion," Abrahamson wrote.

No matter how you feel about the ruling, righteous or not, this ought to bring a chuckle:

• "This is a major victory for taxpayers," said Jeff Schoepke, director of tax and corporate policy for WMC.

 

Comments

[jon]

Is it just me or between the WiDOT, inept legislature, and the supreme court, our state goverement is plain screwed up (including both sides sharing blame, one getting more...)

Why is it a joke that the Supreme Court prevented the taxpayers from being charged too much tax?

Paul Soglin, do you want to overpay your tax?

[John Foust]

Speaking as a computer consultant, I think the Court made the right decision. Sales tax is inexplicable idiocy in my business. It's obvious the tax rules were finagled by big custom software houses a long time ago. For example, here's what the DOR tells me is taxable: Installation and setup of computer hardware, Installation of hardware devices, Installation of canned software, Configuration of canned software, Online or on-site troubleshooting hardware problems, Online or on-site troubleshooting canned software problems, Setting up hardware and canned software on network, Making adjustments to canned software via modem, Installation of canned software upgrade, Inspections of hardware and canned software.

Here's what's not taxable: Writing custom programs, Contract programming, Installing custom programs, Updating custom programs, Training people on how to use software or hardware, Writing queries of databases, Designing screens, forms, reports or menus, Answering people's questions, Reformatting data, Data migration, Data conversion, Data recovery, Designing Web pages, except when tangible personal property is transferred, or the design is the taking and reproducing of photographs, Making backups of data files.

Some days I'm clearing in one category or the other. Many days, I easily jump between the two categories hundreds of times. I talk to clients (non-taxable), install canned software, (taxable), customize the software by writing new code (non-taxable), rinse lather repeat. Talking with clients is non-taxable until I start talking about something that could lead to them buying something from me - but if they don't buy it from me, my time wasn't taxable. DOR's only answer is for me to break down my time into taxable and non-taxable. It's like saying that when you eat dinner, your spoon is taxed but your fork isn't, and when your fork touches your knife, it's another category that requires the Supremes to solve. Most of the time, I punt and charge sales tax all the time rather than boil my brain trying to decipher what they're going to consider custom or not. The problem is, the DOR hasn't ever audited me - it's my clients that they audit. DOR doesn't ask me to explain it - they expect the customer to differentiate subtle distinctions in a task they hired someone to perform for them precisely because they don't have expertise in that field. Guess what they do? They don't want to waste their time so they ask me to charge them the tax all the time.

[Frank Allis]

This is certainly a huge and lightning fast ROI for WMC's investment in the Supreme Court Justice race. Wow!

[John]

They really don't get at WMC. As the state rules against the public, the public might decide Wisconsin is not a friendly enough state.

http://democurmudgeon.blogspot.com/2008/07/who-wants-to-move-to-state-where-its.html

[legman]

Funny but not only is the Supreme court the best court business (WMC) can buy now, but WMC itself is the best business lobby that business can buy. Why is it that manufacturers (except for the Cullen Company that recently left WMC due to business interests with EPIC Systems) do not object to paying their memberships to WMC?, but do object to paying it in taxes which support Wisconsin in general, such as the roads and bridges the public uses to access business for example? The rules are complex, and DOR and the "full time" (<-----HAHAHAHAHAHAHAAAAAA) legislature might start using their "full time" (yeah ...sure) status to rectify these issues, and really start saving businesses and taxpayers some hard earned moola (aka $$$money$$$!). Or is the WI legislature full time only in name and pay? Working a three day week at the capitol, claiming their high mileage reimbursements (and with free capitol square parking nonetheless), getting their entirely tax free $88/day per diems while they sleep in their offices, and then collecting over $45,000/year is a bit sticking it to the taxpayers also. We need a part timelegislature, and then maybe they could get their business done. If I ran for office, I'd be an advocate of this.

Note: I do recognize that there are some "goodies" in the WI state legislature, but not too many from what I have seen lately, and I say this from a nonpartisan standard.

P.S. I loved the spoon, fork, and knife analogy above from an earlier post.

[Paul]

John, you are right -- the decision may not be all that bad but it still highlights two critical points: the state sales tax regualtions are a mess and poorly organized and defined and the decision has a shadow -- the purchase of Ziegler's seat on the Supreme Court by WMC and her participating in and writing the majority opinion.